tax treatment of PPF?

PPF account opened in my wife’s name is maturing on 01-04-2010.It has two components vis money deposited in last 16 years ie 16*60000=960000 and interest earned on the same. my question is on maturity interest part is invested in POST OFFICE MONTHLY INCOME SCHEME, future interests will be clubbed with my income or the same will be treated as my wife’s income and will be taxed accordingly?

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  1. Like maturity proceeds of a LIC Policy , the principal and interest amount of any PPF a/c on closure will be interest free . But any subsequent invest will attract income tax unless it is again invested in PPF , LIC , Infrastructure funds etc. which are interest free upto an certain element as per current Income Tax rules.

    May I suggest that you do not close your wife’s PPF a/c and renew it for another 5 years for a good tax free income to continue. You can also make fresh deposits @ 60K annually.

    Alternatively you can go for a LIC Pension Fund Please do not try ULIP which may be under tax net shortly .

  2. Tax treatment of PPF is Exempt-Exempt-Exempt.

    You can further extend the PPF period by 5 years.

    PO MIS interest is taxable.

    Your wife’s income will be clubbed with your income.